from the pretty-obvious,-really dept

At the beginning of last year we reported on a Swedish study that showed that streaming services had halved the number of people who were downloading music illegally in Scandinavia. That's a pretty stunning figure, but of course is only one data point, which means that people can always argue that it's not possible to generalize. So it's good that not just one but two new reports confirm and broaden that finding.

The report shows that in 2008 almost 1.2 billion songs were copied without permission. However, by 2012 that figure had plummeted to 210 million, just 17.5% of its level four years earlier.

As expected, piracy of movies and TV shows in 2008 was at much lower levels than music, with 125 million movies and 135 million TV shows copied without permission. But by last year the figures for both had reduced by around half, to 65 million and 55 million respectively.

What's interesting is that music has fallen far more than the others. One explanation for that could be the effect observed in the Swedish study referred to above, and the fact that there are far more legal offerings for music than for other media. That's borne out by other figures from the Norwegian research:

Of those questioned for the survey, 47% (representing around 1.7 million people) said they use a streaming music service such as Spotify. Even more impressively, just over half (corresponding to 920,000 people and 25% of Norwegian Internet users) said that they pay for the premium option.

Not only has the number of people engaging in music piracy in the Netherlands fallen in recent times, it also appears to be an infrequent activity for most of those who remain.

There were 6.8m residential broadband connections in the Netherlands in 2012

BitTorrent music piracy occurred on 1.8m unique IPs in 2012, around a quarter of the total

Of that 1.8m, a large passive group of 532,000 (29%) downloaded just one music file

A minority of 188,000 (10%) "hardcore" pirates downloaded 16 files or more

This Long Tail distribution is an important insight, as it highlights that most people take very little. Meanwhile, the top 10% take over half of the content.

The Spotify study quotes some figures from earlier work in the Netherlands, which show that the number of active pirates declined from around 5 million in 2008 to 3 million in 2011 and 1.8 million in 2012. Because the methodologies of the studies were different, these may not be strictly comparable, but they do give an idea of the general direction. The research also provides the following information:

Again, copyright maximalists will doubtless say these are only a few studies, but such claims are looking weaker with every new result that confirms the general trend across multiple countries. They all underline what Techdirt has been saying for years: that the best way to reduce piracy is simply to increase the number of legal options offering what people want at a fair price.

from the check-it-out dept

For this week's awesome stuff post, we've got links to movies about things that we regularly talk about here on Techdirt: the prosecution of Aaron Swartz, the CFAA, patents and piracy.

First up, is a documentary about Aaron Swartz called The Internet's Own Boy by Brian Knappenberger, who previously did a documentary about Anonymous. Knappenberger's film isn't a "memorial" about Swartz, but rather an "investigative" documentary about his story and the lawsuit against him, as well as the legal structure that led to his arrest and trial. The video that Knappenberger has put together is really compelling and touching:

This project has received a lot of attention, so there's no surprise that it's quite close to its $75,000 target with a few weeks to go. It looks like it should be a great project to support.

From once CFAA case to another. Krystof Andres & George Russell are doing a documentary called The Hedgehog & The Hare, all about the CFAA, but mainly focused on the case against Andrew "Weev" Auernheimer. The documentary will also explore how the CFAA goes way too far in trying to criminalize perfectly reasonable computer activities.

The target for this project had much more modest goals than the Swartz one, though the production values definitely look a bit more amateurish. Plus, frankly, the rewards on the Swartz movie are a lot more reasonable. That said, with just a few days left, it looks like this movie is likely to squeak by the target even if it's just slightly under as I write this.

This next one, I'm a bit less sure about, but the topic could be interesting. It's supposedly a short film, made in South Africa about the big pharmaceutical makers going after generic drug makers, called The Cure. What makes me a bit unsure about is that the filmmakers, Katey Carson and Errol Schwartz, seem a hell of a lot more excited about the fact that (a) they signed up some "Oscar-winning talent" to be in the film and (b) that they're filming the whole thing with an iPhone, than they are about the story, which they barely mention at all. The topic sounds interesting. I just wish they'd actually have said something about that, rather than the other stuff which really isn't that interesting.

The project has barely raised any money, and they're pretty ambitious to seek $35,000 for this. But since it's an Indiegogo "flex funding" campaign, they'll get the money even if they don't raise the full amount. Also, the "rewards" you get back seem ridiculously high priced. You have to pay $100 just to get a download of the short film and $50 for the script? Hmmm. Love the idea of a film that highlights problems with drug patents, but not sure this is the best way to do it.

And, finally, a documentary about piracy. I mean that's what critics insist this site is all about, right? So I figured, why not. Here's a documentary film about a Somali pirate -- you know, one who actually hijacked a ship, called The Smiling Pirate, which aims to tell the story of the one remaining living member of the pirates who hijacked the Maersk Alabama. As the story suggests, despite a forthcoming Tom Hanks movie about this whole thing, there appear to be a lot more questions than answers about what really happened both aboard the ship and then with the captured pirate after the whole thing happened.

Sounds like an interesting story, but it hasn't picked up very many backers yet. It's also an Indiegogo flexible funding project, so will receive any money it raises, but it's not clear if it'll get enough to really support the making of the documentary any time soon.

That's it for this week. Next week we'll be back with more awesome stuff.

from the a-little-history-lesson dept

Missed this when it first came out, but Bloomberg ran a fantastic report at the beginning of February, highlighting how piracy and fraud were key components to helping America catapult into the industrial revolution. In fact, there are reasonable arguments to be made that if the US was not a "pirate" nation, it would not have had the kind of success that it has had as the industrial world leader. We've discussed some of this in the past, and have highlighted how Eric Schiff's research showed how other countries (the Netherlands and Switzerland) industrialized by explicitly rejecting patents. The US didn't go that far, but it did involve quite frequent copying of the efforts of others and then improving on them, without fear of repercussions.

In its adolescent years, the U.S. was a hotbed of intellectual piracy and technology smuggling, particularly in the textile industry, acquiring both machines and skilled machinists in violation of British export and emigration laws. Only after it had become a mature industrial power did the country vigorously campaign for intellectual-property protection.

This is a point we've made many times as well. Patent and copyright system supporters frequently argue that stronger laws are needed to create incentives for creation and innovation. But, there are a ton of studies that show the actual pattern runs the other way. When you look at the pace of innovation before and after a change to patent laws, or if you do cross-country comparisons at the same time for similar types of economies, you quickly see that those with weaker laws show more innovation. The ratcheting up of patents is rarely about increasing incentives to innovate. Patents are put in place with the support of incumbents, knowing that it allows them to "exclude" competitors and upstarts. It is not a tool of innovation, but a tool to suppress disruptive innovation. Not having those laws (or having them widely ignored) leads to a situation in which people continually improve what's out there -- which is how the US economy took over the world during the industrial revolution.

The most candid mission statement in this regard was Alexander Hamilton’s “Report on Manufactures,” submitted to Congress in December 1791. “To procure all such machines as are known in any part of Europe can only require a proper provision and due pains,” Hamilton wrote. “The knowledge of several of the most important of them is already possessed. The preparation of them here is, in most cases, practicable on nearly equal terms.”

Notice that Hamilton wasn’t urging the development of indigenous inventions to compete with Europe but rather the direct procurement of European technologies through “proper provision and due pains” -- meaning, breaking the laws of other countries. As the report acknowledged, most manufacturing nations “prohibit, under severe penalties, the exportation of implements and machines, which they have either invented or improved.” At least part of the “Report on Manufactures” can therefore be read as a manifesto calling for state-sponsored theft and smuggling.

In fact, as the article notes, our own original Patent Act recognized this very fact, by refusing to cover foreign inventions.

Of course, the idea that loose patent and copryight laws can help nations develop economically is not a new idea. Over a decade ago, we were writing about how various officials were admitting that strong IP laws probably did more harm than good for developing nations. And, yet, the US continues to try to push its extreme maximalism for copyright and patent laws around the globe. Either they are doing this out of ignorance (a real possibility) or because they actually understand the truth, which is that other countries with IP laws like the ones in the US will see a slow down in their economic development.

Either way, those who insist that the US was founded on the principles of strong respect for "intellectual property" haven't paid that much attention to the actual history of American industrialization.

from the more-than-they-like-to-admit,-I-suspect dept

The HBO show Game of Thrones has become something of a symbol for TV piracy as a response to lack of availability, ever since it was used as an example in a comic by Matthew Inman (which was then reprised as a post by MG Siegler, minus the jokes). This is probably because it's ridiculously addictive (once you start watching, there's no way you're going to stop before someone stabs that Joffrey kid). This month the second season began, and after all the criticisms of their distribution scheme, HBO accidentally threw frustrated online viewers a bone by leaking the second episode nearly a week ahead of schedule—someone working on the Dutch edition of HBO Go must have accidentally flipped a switch, and winter came early. But before that happened, the season premier aired to a massive ratings jump, which most people anticipated. Why? Because, they reasoned, the nine-month gap between seasons gave new viewers a chance to catch up with (and get hooked on) the series by watching season one on HBO On Demand and HBO Go.

It's a good theory, but only some are prepared to mention the elephant in the room: plenty of people (quite possibly the majority) caught up through unauthorized streams and torrents, just like Matthew Inman. And that brings us to the bigger elephant lurking in the whole house: how much has piracy contributed to the rise of HBO-style television? Would we have complex, high-concept, critically acclaimed shows like Mad Men, Breaking Bad, Boardwalk Empire and Game of Thrones without it? Many people attribute this fundamental shift in the nature of popular television, from episodic towards serialized, to DVDs and legitimate digital sources—but I'd wager that piracy is a much more significant factor.

There are two main reasons. Firstly, the ability to watch any episode any time makes such can't-miss-an-episode shows less of a commitment. This, alone, is the single biggest contributing factor to the popularity of heavily serialized television, and it is impossible to explain it entirely with DVDs and sources like iTunes. Many cable subscribers turn to piracy as a way to catch missed episodes, and that safety net prevents serialized shows from alienating viewers and losing momentum. Secondly, unauthorized sources are especially popular with the fanatics—the people who evangelize "must watch" shows to their friends and coworkers, and who create memes with screencaps to spread on Tumblr and Facebook. That's not to mention the amateur critics and TV bloggers who generate buzz (in fact, there is a bit of a back and forth going on over the ethics of piracy in the critic community).

Of course, as digital offerings get better, more and more of this kind of activity happens through legitimate channels instead of piracy (not like anyone's been saying that all along, or anything). But services like Netflix got to the table once the serial television trend was in full-swing, so they don't account for its inception. Some people fear that television piracy will put at end to such ambitious undertakings in the medium—but they should stop to consider the hand it played in making them possible to begin with.

from the not-this-again dept

It appears that the same arguments that many of us have been fighting for many, many years are suddenly playing themselves out again in the National Review Online. It started with a really fantastic article by Reihan Salam and Patrick Ruffini arguing that legislating to deal with "piracy" doesn't work and is the wrong approach anyway, because innovating and providing better solutions simply works better. If you're a regular Techdirt reader, you won't be surprised by the Salam/Ruffini piece -- it hits on many of the key points we've raised. However, it is nicely packaged up in a single article that should be required reading for anyone trying to understand why fighting piracy through legislation is the wrong approach.

In response, Robert VerBruggen, an associate editor at the National Review decided to write a rebuttal that isn't so much a rebuttal at all. As Tim Lee rightly points out, the two sides appear to be arguing totally different things. Salam and Ruffini are pointing out that enforcement isn't working (and isn't workable), while also leading to collateral damage. But, at the same time, innovating and providing solutions that people want do seem to work -- and create new opportunities for content creators and consumers alike. VerBruggen, on the other hand, is pulling out the famed "but... but... piracy!" argument we've seen too often -- as if the fact that "piracy exists" suddenly makes all logic pointless. As Lee notes:

VerBruggen responds by insisting that piracy is wrong. He’s right, but this doesn’t get him as far as he thinks it does. This isn’t just an abstract exercise in moral philosophy. The government has limited resources, and a long list of problems to deal with. The question isn’t “should the government try to stop piracy,” it’s “how many resources should the government devote to combatting piracy as opposed to other problems.”

And VerBruggen never really grapples with this question. He seems to believe that the right amount of enforcement is more than we already have, but he doesn’t offer any principled basis for deciding how much more, or how to tell when we’ve passed the point of diminishing returns. Without such a principle, we’re just going to have this debate over and over again, as each new anti-piracy measure fails and Hollywood comes back for still more restrictions.

This is a key point, and I don't know if VerBruggen is just new to this debate and therefore trotting out silly, long-dead tropes because he doesn't know any better -- or if that's just the best the "other side" can do these days. Either way, I wanted to dig a bit deeper into a few of VerBruggen's really questionable claims.

When brick-and-mortar bookstores complain about the threat they face from Amazon.com, they are complaining that customers will leave them for a superior alternative; when Hollywood complains about piracy, they are complaining that customers have left them for an illegal alternative. They have stopped paying for Hollywood products yet are still consuming them. These are not even remotely similar situations — morally, legally, or economically.

VerBruggen says this as if "an illegal alternative" and "a superior alternative" are mutually exclusive. They're not. And that's the issue. History has shown, time and time again, that infringement is a way for consumers to express that they're not satisfied with the official versions and have found "a superior alternative." That the said alternative is "illegal" is an issue, but it doesn't necessarily mean that the best response is a legal one. Why VerBruggen makes these assumptions is unclear.

With this distinction in mind, one might find it rather odd for Salam and Ruffini to insist that the solution to piracy is “innovation” rather than law enforcement. By “innovation,” they mean primarily that Hollywood should make it easier and cheaper for customers to buy their content digitally, citing studies indicating that when digital content becomes readily available through legal channels, piracy goes down. But even assuming Hollywood can discourage piracy by cutting prices and offering its content in different ways, since when do we tell crime victims to appease their tormenters?

As far as I can tell, this is the craziest part of VerBruggen's argument. It is, effectively, "so what if everyone can be better off by innovating out of this mess, this is wrong wrong wrong!" As we've pointed out for years, if you have a solution where everyone is better off, there is no moral argument. It seems silly to be arguing what VerBruggen seems to be arguing, that it's more moral to have everyone worse off with no piracy, than to have everyone better off with some piracy. It just doesn't add up.

Moreover, in no other industry do we allow consumers to force prices down by taking products for free whenever they, personally, think the legal versions are too expensive or inconvenient. Any customer may refuse to buy a product that’s undesirable, or even organize a boycott — but then that customer needs to go without the product.

The problem here is easy to spot. It's in the word "take." That's not what's happening here. The truth is that, as in every other industry, consumers force down prices by finding "a superior alternative" as he suggested earlier. Taking implies something is directly taken from the creator and they no longer have it. That's simply not true.

Salam and Ruffini provide no justification for singling out industries that sell intellectual property — and little evidence that these industries’ disproportionately young, bratty, and entitled consumers are better equipped than the free market to decide what a “fair” price is for an album or movie that cost thousands or even millions of dollars to create and market.

I won't even bother discussing the fact that he appears to be calling the industry's customers, who they're supposed to be trying to win over, as "young, bratty and entitled," and just focusing on his bizarre definition of "free market." He seems to miss that this is the free market. Setting up a centralized government-granted set of artificial monopolies over non-rivalrous, non-excludable goods is a price restriction on a free market. A "fair price" is what the actual market sets -- and that means the market of everyone, not just the customers that VerBruggen likes.

For starters, while making content widely available for low prices does seem to reduce piracy, it hardly eliminates it.

Er. Enforcement and new laws every two years has hardly eliminated it either -- in fact, it's been shown to increase the rate of piracy. So, I'm at a complete loss here. If VerBruggen is arguing that the only proper solution is the one that "eliminates" infringement, well, then he's living in a fantasy land, because no such solution exists. The argument that Ruffini and Salam made (which is backed up with pretty significant evidence) is that innovating and providing "a superior alternative" does a better job to reduce piracy than enforcement (which doesn't appear to work at all beyond an initial hit until people scramble and find alternatives). Again, we're back to VerBruggen basing his entire argument on "piracy is wrong wrong wrong," without taking into account what his preferred solution actually does compared to Salam and Ruffini's alternative.

Spotify’s payment formulas are not public, but various leaks indicate that on average, artists and labels are paid around one-third of one cent every time a user listens to (“streams”) a song. By way of comparison, artists and labels make 70 cents when a song is purchased for 99 cents from iTunes. Thus, a user has to listen to a song on Spotify more than 200 times before earning ad revenue for the artist and label that’s equivalent to a sale.

Comparing a Spotify play to an iTunes purchase is meaningless, because they're not the same thing by any stretch of the imagination. I mean, why not compare Spotify to radio? In some ways, that may be more comparable. In the US, musicians get paid a big fat nothing for radio plays. Yet, somehow, it's been pretty damn important for artists to get on radio. Because it helps them make money elsewhere. Looking at Spotify in isolation misses the point... but VerBruggen does that again and again:

But piracy does “put pressure on profit margins,” as Salam delicately put it on National Review Online recently. By one estimate, per capita, inflation-adjusted spending on recorded music has fallen 64 percent since its peak in the late 1990s, and is lower today than at any time since at least 1973, despite the fact that every other person you pass on the street is wearing earbuds.

Again, he's looking at one small aspect of the music business in isolation: how much is spent on recorded music. But he leaves out every other aspect of the music business -- including things like live -- which has grown at an incredible rate over the same time. More importantly, he leaves out that artists earn a larger chunk of revenue from live than they do from recorded music sales -- most of which go to the labels, not the artists. Why focus on that anyway? It's like complaining that automobiles are terrible for transportation because fewer buggy whips are selling. When you have dumb metrics, you're going to get silly results.

The numbers change little when one uses total rather than per capita revenue, and home-video sales are falling as well.

Oh come on. Home video wouldn't even exist if Hollywood had its way and banned the VCR 30 years ago, so I'm sorry if I find complaints about the home video market shrinking as evidence of a problem. As we saw with the VCR, new markets develop, and they seem to develop against Hollywood's own wishes -- and then become a huge revenue driver for Hollywood. The best solution, if we look historically, is to get Hollywood out of the way and just let those new models develop to save Hollywood from itself.

That in itself should be troubling to anyone who thinks the profit motive matters — with less profit, presumably, will come less creative output.

Thing is, we don't need to "presume" anything. We have data. And the data shows that more music is being created and released and monetized than ever before. And the data shows that more films are being created and released and monetized than ever before. You can presume all you want until the cows come home, but if reality says you're wrong, it's difficult to take those presumptions seriously.

As commentator Eduardo Porter noted in the New York Times, while the total number of music-album releases rose between 2005 and 2010, releases of albums that sold at least 1,000 copies — a rather low standard by which to judge whether an artist is making a significant contribution to the world of recorded music — declined about 40 percent. Of course, like Salam and Ruffini’s, Porter’s data are highly debatable — he relies on the Nielsen sales database, which excludes some independent releases and does not count sales of single songs.

It doesn't just exclude "some" independent releases. It excludes tens of thousands (potentially hundreds of thousands) of independent releases. If you just look at TuneCore and CDBaby alone, you'd realize how silly relying on SoundScan is as a proxy. And, once again, this is only looking at "recorded music" sales in isolation. The fact that fewer albums sold 1,000 copies ignores the massive explosion of new music (which just paragraphs earlier, VerBruggen "presumed" was impossible), meaning that there's a ton more competition. Furthermore, it ignores that recorded music is not the main way that many artists monetize these days, and looking at it in isolation is pretty pointless. Finally, many of those artists who sold less than 1000 albums would have made a big fat $0 under the old system, because no major label would have bothered with them and they wouldn't have had any other outlet. Aren't we all (including, most importantly, the musicians) better off in a world where a whole bunch of artists get to make something rather than nothing? But, again, the "but... but... piracy!" argument blinds VerBruggen to this reality.

The finer points of entertainment economics aside, if widespread and increasingly popular illegal behavior is costing American companies business, and possibly reducing artists’ creative output, it is first and foremost a law-enforcement problem, not an “innovation” problem. It is entirely reasonable for Hollywood to petition the government for better anti-piracy efforts, even if the industry has lobbied for bad legislation in the past.

Almost nothing in this paragraph is supported by... anything. If law enforcement doesn't work, how is this possibly a law enforcement problem? This is yet another example of someone trying to be right rather than realistic. It's a recipe for disaster, but it's the same recipe that the legacy entertainment industry has been cooking up for decades to no effect. Who would ever double down on that strategy?

from the calling-their-bluff dept

One of the positive outcomes of the debate that has raged around SOPA/PIPA is that more people have looked at the facts, rather than listened to the rhetoric, surrounding piracy. In particular, the copyright industries' hitherto unchallenged claim that piracy is destroying their business is finally being challenged – not least by reports like "The Sky is Rising" that consolidate industry figures to show that things are really looking pretty good across the board.

Another indication of that new attitude is the incredible response elicited by an article in Forbes entitled "You Will Never Kill Piracy, and Piracy Will Never Kill You", which has received over 3600 re-tweets on Twitter, and nearly 10,000 shares on Facebook. The basic argument will be familiar enough to Techdirt readers: that the war on piracy can never be "won", and that what is needed is a change of attitude on the part of the media companies. The article concludes:

Treat your customers with respect, and they’ll do the same to you. And that is how you fight piracy.

Pretty obvious, you would have thought, although strangely it isn't to the media companies.

The author of that piece, Paul Tassi, has followed it up with "Lies, Damned Lies and Piracy." Although this has proved far less popular than the first one, I think it's better, because it offers some original insights where the other went over well-trod ground.

I particularly liked his closing thoughts:

If the industry is struggling, I just don’t see it, as their projects are getting bigger and more costly with each passing year. When a movie bombs or a show gets cancelled, no one ever says “oh, well, piracy.” Rather, it’s the quality of the product that accounts for such failures. Even with relatively high piracy rates across all forms of media, we’re still seeing blockbuster films, shows and games released at a higher rate than ever, and profits to match.

I think the media industries would love to kill piracy with a quick piece of legislation that blacks out every torrent site on the internet, but I don’t think they want to fight it so much that they’ll change their entire distribution model on a dime, which would actually go a long way toward truly competing with piracy. The reason things are the way they are is because they’re working. Despite the fact that even though yes, every piece of media is available on the internet for free somewhere, people are still buying.

There are three really key points packed in there. First, that the media industries just aren't struggling, despite their cries of woe. Secondly, what causes real financial harm to the film and music worlds are bad products that lose huge amounts of money and disappoint audiences. And finally – and most importantly – if piracy really were so life-threatening to the copyright industries, and if their bottom lines really were in danger, then they would have tried something other than begging lawmakers to protect them. The fact that they haven't, as Tassi emphasizes, means that there is no real pressure on them to do so: people still buy lots of stuff, piracy isn't really a problem, things are working.